Thousands of small businesses to benefit from new government buying rules, boosting local jobs, growth and innovation

Thousands of small businesses across the country will have more opportunities to win valuable contracts with public sector organisations, kickstarting local economic growth and innovation and creating jobs for local communities as the Government delivers on its Plan for Change.

Measures announced by the Government today will speed up and simplify procurement processes in the public sector, where £400 billion is spent each year on essential goods and services - driving growth and improving the lives of working people.

The changes outlined today include proposals for a major shake up of spending rules, with local councils able to reserve contracts for small businesses to maximise spend within their area and help boost local economies. 

Alongside this, a new duty will be placed on firms that win contracts with government bodies to advertise jobs at job centres, delivering real change for people, bringing good jobs closer to home and getting Britain back to work. 

The National Procurement Policy Statement (NPPS), will gear all parts of the public sector towards delivering growth. The new rules include eight actions to return public procurement back into the service of the country and working people, and drive forward the Plan for Change.

Georgia Gould, Parliamentary Secretary at the Cabinet Office, said:

“Businesses tell me that the current system isn't working. It is slow, complicated and too often means small businesses in this country are shut out of public sector contracts.

“These measures will change that, giving them greater opportunity to access the £400 billion spent on public procurement every year, investing in home grown talent and driving innovation and growth.

“This new policy statement sets out our vision for how procurement can put this country back into the service of working people, and deliver our Plan for Change - by making sure the public sector is committed to growing the economy and empowering our communities with innovation and opportunity.”

Current processes require Social Value measures on contracts, which put requirements on businesses to help bring forward positive change in communities and the country as a whole.

However, there are currently multiple different approaches used across the public sector and potentially many different criteria, confusing business and making it harder to ensure the commitments made are actually delivered.

The Government will be updating and streamlining the system used by all central government departments and their agencies to align it with the Government's missions. 

This will make it simpler to use, giving small businesses a better chance when bidding for contracts, and will make sure companies who profit from government work give back to the community.

Small Business Minister Gareth Thomas said:

“For too long small businesses have been stuck on the sidelines of the procurement process with complicated bureaucracy and a confusing system. That changes today.

“These measures will mean small firms can more easily offer their expertise to key projects both locally and nationally, helping SMEs to scale up, securing jobs and creating opportunities across the country.”

AI and Digital Government Minister Feryal Clark said:

“There is a £45 billion jackpot of potential productivity savings if we make full use of technology across our public services, it is not an opportunity we can miss.

“To get this right, we need to make sure public sector organisations can get their hands on the right technology for them, quickly. That's why our Digital Commercial Centre of Excellence will help the rest of the public sector invest in long-term solutions and stop hasty quick fixes.”

Alongside the NPPS, a range of measures to support its delivery and make savings across government are also being introduced. 

This includes the development of a new AI tool for commercial teams across government to cut bureaucracy wherever possible - such as to simplify redacting contracts and quality assurance of procurement documents. 

This includes the development of a new AI tool for commercial teams across government to cut bureaucracy wherever possible - such as to simplify redacting contracts and quality assurance of procurement documents. 

As first announced in the blueprint for a modern digital government, a new Digital Commercial Centre of Excellence will also be set up in the Department for Science, Innovation and Technology to embed a “buy once and well” attitude, and drive innovative solutions to problems facing our public sector, securing long-term solutions, rather than short-term fixes for digital and IT products and opening up opportunities for small and medium businesses to work on digital transformation. 

The current system is broken: two departments might buy two types of equipment for the same purpose, requiring two teams with different individual skills to service and maintain. 

The new approach means buying only once - requiring only one team, and one set of skills, removing duplication, saving the taxpayer money, and reducing waste in government.

A new Commercial Innovation Hub is also being considered, to establish a golden link across government departments, embedding learnings from extraordinary events such as vaccine procurement into our day to day processes. This will support departments to deliver greater value from the new flexible powers offered by the Procurement Act - and act as a workshop to seek out innovative commercial solutions that drive greater value. 

The NAO recently estimated there are between 8,000 and 21,000 frameworks available to public sector buyers through external third party organisations. These agreements are often not transparent, with hidden fees and charges, racking up the cost of common goods and services.

A new Register of Framework agreements will be produced, shining a light on those rip-off frameworks from third party providers that are profiting off our local councils and NHS, taking money away from front line services.

The Government will also be consulting on more reforms including a requirement for large contracting authorities to publish their three-year targets for small business and social enterprise spend and report on this annually - as well as the exclusion of suppliers from contracts worth more than £5million if they don't complete prompt payments of invoices. 

NOTES TO EDITORS

• The National Procurement Policy Statement (NPPS) has been laid in Parliament today [13 February 2025] and will come into force alongside the new Procurement Act on 24 February.

• The NPPS is a statutory statement which lists the national strategic priorities that procurers should consider when buying goods, services and works.

• A Register of Commercial Tools will allow contracting authorities to see all available commercial frameworks and their fees together in one place - including those established under the previous legislative regime.

• The statement will go live at the same time as the Procurement Act on 24 February 2025.

• Proposals for local councils to reserve contracts for small businesses would only apply to contracts that are valued below the threshold levels at which the requirements of the Procurement Act 2023 become applicable.